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Question

State and discuss any two factors that will shift the Production Possibility Frontier (PPF)to the right.

Or

Draft a hypothetical schedule for a straight line Production Possibility Curve.

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Solution

Two factors that may shift the Production Possibility Frontier of an economy away from origin (to the right) are:
(a) Increase in resources available to an economy (natural, physical or human resource).
New resources may increase the output potential in an economy resulting in shift of PPF away from origin.

(b) Improvement in technology, when technology improves the production potential increases, i.e. economy may be able to produce more output using existing resources efficiently.

Or

Since Marginal Rate of Transformation is constant, PPC will be a straight line.


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